Montenegro’s Finance and Social Protection Minister Milojko Spajic on Thursday announced that the government plans to negotiate with the European Union to repay a billion dollar loan from China for the unfinished first phase of the Bar-Boljare highway.

Spajic explained that the government was looking for ways to finance its largest infrastructure project on more favorable terms.

“Montenegro is negotiating with European partners to find a way to most favorably finance projects in the country, including the highway. We didn’t ask someone else to repay our debts, but to potentially refinance them on more favorable terms, ”Spajic told Nova.rs. media.

The Bar-Boljare section represents the Montenegrin section of a highway that will connect its Adriatic coast to the Serbian capital, Belgrade.

The Montenegrin section is being built by the China Road and Bridge Corporation, CRBC. The first section is 85% funded by a loan of $ 944 million from the Chinese bank Exim Bank.

The first annual repayment of $ 67.5 million falls in July.

According to state data from December 2020, Montenegro’s public debt was then equal to 90.85% of GDP, while the cost of the first 41-kilometer phase of the highway alone was estimated at 45%. of GDP.

On March 18, Deputy Prime Minister Dritan Abazovic called on the EU to help Montenegro replace debt owed to Exim bank with a loan from a European bank, stressing that this would help curb Chinese influence.

But on April 12, European Commission spokesman Peter Stano said the EU would not help Montenegro repay its loan, even if it sympathizes with the goal of reducing its dependence on the loan. from China.

“Speaking specifically of Montenegro and China, the EU is concerned about the socio-economic and financial effects of some of the Chinese investments which may have effects in the country,” he said.

“There is a risk of… dependence on debt. The motivation for taking such steps, taking out such loans should be checked with the Montenegrin authorities, ”added Stano.

EU rapporteur for Kosovo Viola von Cramon-Taubadel warned that the decision to refuse to support Montenegro’s loan was strategically reckless.

On April 15, Von Cramon said that Montenegrin’s new government needed to sort out “the financial legacy of corrupt leaders such as Milo Djukanovic” – the president of the country and leader of the former ruling party.

“The EU made mistakes in Greece and China took over the port of Piraeus. Now the Chinese government has the chance (if Montenegro cannot repay the loan) to take back major parts of Montenegro’s coastline, ”Von Cramon said on Twitter.

The former government of Montenegro hailed the highway as a crucial infrastructure project, while civic activists and opposition parties at the time said it was too expensive and corruption was suspected.

In March 2019, the prominent NGO MANS filed criminal proceedings against then Transport Minister Ivan Brajovic, accusing him of losing the state budget of around 134 million euros because ‘he had failed to insert a passage in the project plan concluded with the CRBC.

Minister Spaic says just a quarter of the highway cost 20 million euros per kilometer, making it one of the most expensive highways in the world.

If Montenegro cannot repay its loan, the terms of the contract give China the right to access Montenegrin lands as collateral.

The Chinese Embassy in Podgorica said China was not responsible for the Balkan country’s debt problems.

“Montenegro has taken out a loan of US $ 944 million from China for the construction of the [Bar-Boljare] highway, which accounts for less than a quarter of Montenegro’s total debt, and the interest rate on the Chinese loan is only 2 percent, which is relatively low compared to Montenegro’s total debt “, the embassy told EU Observer.

The deadline for completing the first section has been extended twice in the past year and costs have risen to € 1.3 billion. The Ministry of Capital Investments said the step could be completed by the end of 2021.

Montenegro has tried and failed twice to secure funding from the European Investment Bank for the second section of the highway. Two feasibility studies carried out by international consulting firms in 2009 and 2012 showed that the projected traffic volumes did not justify the expense.